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Trade deal talks get under way

March 1st, 2020 5:00 PM

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WHILE Ireland’s political parties grapple with the difficult task of forming a new government, caretaker Taoiseach Leo Varadkar and his back-up team will be keeping a close eye on the crucial trade talks between the European Union and the United Kingdom. As long as these talks are going on, the UK will stay inside the EU’s single market and customs union, trade will be unimpeded, as will free movement of people.

This will last until the talks are concluded, but the big question is: will there be enough time to do that by the end of the Brexit transition period set by Boris Johnson for December 31st next? The UK side wanted to get the trade talks underway at the end of January, immediately after they departed the EU, but the latter side has taken its time in formulating its negotiation strategy, seemingly a tough one which was only signed off on this week by the European Commission.

The EU has had bigger fresh to fry lately, especially after last week’s summit at which it was hoped to agree the Multi-annual Financial Framework (MFF) for the period 2021 to 2027, but it ended without agreement and is due to be reconvened later in March. The loss of Britain’s contribution to the EU coffers from next year will leave a hole in its budget and how that is going to be filled is the big problem the MFF needs solved.

Meanwhile, there are justifiable fears that the 10-month period available for the trade talks between the EU and the UK, from this March to December inclusive, will not be enough, especially as there is such a gulf between the preferred outcomes expressed by both sides. The common objective would be quota-free and tariff-free trade in goods, but for this to happen, the EU is insisting that the UK would have to continue to adhere to EU labour, social and environmental regulations into the future to ensure a level playing field and no lowering of standards below those that were applicable on Brexit day.

The relatively short window for such difficult negotiations will almost certainly be a problem and two unwanted outcomes this could result in would be a bad deal or no deal by the end of this year. Indeed, we could be in for more scary brinksmanship from Boris Johnson and his chums before year-end.

Johnson and his government seem to be intent – deal or no deal – on finishing up the trade talks with the EU by December 31st, especially as the £39bn severance payment negotiated as part of the withdrawal agreement only covers the UK until then. If the transition period needs to be extended at that stage to facilitate further talks, there would be an expectation that the UK would have to contribute more to the EU and that would not go down well in an emboldened Westminster.

The EC negotiating team, led by Trade Commissioner Phil Hogan from Kilkenny, won’t want to give the UK a sweetheart type of trade deal that might encourage other countries to think about leaving the EU. While his brief is to act on behalf of the remaining 27 countries still in the EU, hopefully Hogan’s influence will see to it that his native Ireland is not thrown under a bus in these negotiations.

Being the UK’s nearest neighbour, our exports – especially in the agri-food sector – are vital to this country’s economic wellbeing. It is better from an environmental viewpoint that we continue to do the majority of our trade with the UK rather than adding excessive food miles to our produce, importing it to far-flung places such as the far east.

The negotiations will also have implications for our fishermen and the coastal communities they come from, because if the fishing grounds around the coastline of Great Britain become off-limits to EU fishermen, they will be driven further west to Irish waters and this would put a further squeeze on fish quotas. The EU would like, ideally, to keep the British fishing industry tied into the Common Fisheries Policy.

What must be an essential element of any trade deal is a disputes resolution mechanism to be able to address any future concerns quickly and decisively as the EU maintains that the safeguards built into World Trade Organisation (WTO) deals lack teeth.

This would be vital if there is any slippage in the standards agreed by both sides. However, before any agreement can be brokered, there is a lot of talking to be done and, hopefully, it will be entered into in a constructive manner by all concerned.

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